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EDA industry consolidation seen continuing
by George Leopold
June 13th 2005

ANAHEIM, Calif. - The EDA industry is expected to consolidate further over the next several years, reflecting many of the same forces that are shaping the global economy.

Industry executives and analysts speaking at the Design Automation Conference here on Monday (June 13) said key variables include the growing influence of the consumer market on EDA and the pace of future R&D spending.

"There's going to be more consolidation in EDA," Jennifer Jordan of Cadence Design Systems predicted during a panel discussion on investing in the EDA sector.

At the same time, EDA companies are striving to cut the cost of new designs by reducing the number of "point solutions," said Mike Schuh of Foundation Capital (Menlo Park, Calif.).

R&D investment is expected to remain healthy, with increases ranging from between 5 and 9 percent. Driving R&D spending will be new business models focusing on verification and other tools.

What this means for investment in EDA start-ups remains unclear. "There is too much capital chasing to few investment" ideas," said Charles Hale of New York-based DivestCap Management Corp. Start-ups will provide most of the design industry's new solutions, added Schuh, but investors need to see "traction" with customers before they will be willing to invest.

Asked about the impact of leadership changes at the U.S. Securities and Exchange Commission announced last week, panelists agreed that public EDA companies will face less regulation. They disagreed on whether that's a good thing. "The houses still need to be cleaned," Hale warned.

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